XAPPmedia raises $3M for its ‘voice click’ mobile audio ad technology

A Q&A with XAPPmedia CMO Bret Kinsella. The Washington, DC-based startup, which offers an interactive audio advertising platform for mobile devices, last week announced the closing of a $3 million Seed funding round. It was led by co-founder and executive chairman Frank Raines, former chairman and CEO of Fannie Mae, and also included undisclosed Angel investors. XAPPmedia was founded in 2013 by Raines, Pat Higbie, John Kelvie and Michael Myers.

Three years ago, the Interactive Advertising Bureau suggested that everyone knows there is no such thing as a voice click. However, in an audio world, voice is far more convenient for users than touch. We set out to create the first interactive audio ads that enabled voice-activated engagement. This provides convenience for consumers, higher conversion rates for advertisers and higher ad unit rates for Internet audio publishers.

SUB: Who are your target markets and users?

Kinsella: The three groups in XAPPmedia’s target market are audio content consumers, publishers and advertisers. Consumers receive XAPP Ads when listening to content provided by mobile audio publishers such as Internet radio and streaming services from radio broadcasters. We focus a great deal of product engineering around creating a great consumer experience which supports the audio listening environment created by audio publishers. We also focus on delivering an interactive audio ad unit that yields high conversion rates so advertisers see higher returns on advertising investment. By serving both consumers and advertisers well, we also help publishers by providing a super-premium ad unit that improves the economics of Internet radio businesses.

SUB: Who do you consider to be your competition, and what differentiates XAPPmedia from the competition?

Kinsella: XAPPmedia provides interactive audio ad units that compete directly with many other advertising formats such as television, traditional radio spots and digital advertising. All ad formats are competing for the same bucket of marketer ad dollars. XAPP Ads are unique as mobile audio ad units that not only enable instant and measurable consumer conversion, but also are accessible by the 50 million monthly listeners who are ‘ultramobile’ and cannot interact with an ad on a screen by touch or sight. When listeners are driving, walking, working, or exercising, they are consuming audio content hands-free and eyes-free and can only use their voice if they are interested in engaging with an ad. XAPP Ads are the first solution to make this capability available to audio content consumers and advertisers.

SUB: You just announced that you’ve raised $3 million in Seed funding. Why was this a particularly good time to raise outside funding?

Kinsella: Consumers are flocking to mobile audio apps and advertisers are looking for effective ways to engage and convert them into customers. XAPP Ads reduce the friction for consumers to engage with audio ads that interest them. Leveraging a combination of mobile, cloud and voice technology is of interest to investors and an even bigger interest is technology that can better monetize mobile advertising.

SUB: How do you plan to use the funds?

Kinsella: We are adding new features to our interactive audio ad platform, expanding the team and bringing new publishers onboard.

SUB: What was the inspiration behind the idea for XAPPmedia? Was there an ‘aha’ moment, or was the idea more gradual in developing?

Kinsella: For the founders, the ‘aha’ moment was experiencing ads on Internet radio and realizing that the advertising was the same one-way communication as with broadcast radio. The audio app providers weren’t able to take advantage of the two-way interactivity inherent in digital platforms, and the question was: “Why isn’t someone using voice over the smartphone microphone as the engagement backchannel.”

SUB: What were the first steps you took in establishing the company?

Kinsella: Aside from incorporating the business, we had to build an engineering team with expertise in mobile, cloud, and voice technologies. We also needed to study the user experience on mobile Internet radio to determine core requirements for the service. We then had to learn the advertising industry. We were confident the technology would work and the value proposition would be compelling, but we needed to understand the trends driving industry change and the practices that governed its operations. And, we listened to a lot of Internet radio from both the pure plays and the traditional broadcasters—that was fun.

Link to XAPPmedia ad sample, from NPR/Lumber Liquidators.

SUB: How did you come up with the name? What is the story or meaning behind it?

Kinsella: The founders saw an opportunity in the digital media space for people who consume content via mobile apps while they’re ultramobile. We picked ‘XAPPmedia’—pronounced ‘Zap Media’—because it included ‘app’ and ‘media,’ and the phonetic sound connotes instant action. Since we were looking to help instantly connect consumers to advertised offers, ‘XAPP’ had the right sound. In the audio business, having the right sound is important. It was also an available domain name, which always helps.

SUB: What have the most significant challenges been so far to building the company?

Kinsella: Getting the voice technology on mobile to work well while maintaining a great user experience. This is not trivial given the operating environment for mobile users. We have a strong solution today based on learning a lot about the strengths and weaknesses of various approaches and the limitations of component solution providers. Those learnings are the source of intellectual property that took 17 months to develop prior to launch. We add to that knowledge base daily, but our learning curve is advanced and we are able to work much faster than in the early months of development.

SUB: How do you generate revenue or plan to generate revenue?

Kinsella: We charge audio publishers a fee whenever XAPP Ads are served. We can also facilitate cost-per-action agreements, but most publishers today prefer a CPM model. We expect that to change over time and support a mix of both models.

SUB: What are your goals for XAPPmedia over the next year or so?

Kinsella: Our goals over the next year are to expand XAPP Ad inventory across multiple Internet radio publishers to match the current advertiser demand we are already experiencing, [and] demonstrate measurable and dramatically higher audio advertising response rates from XAPP Ads that improve both ROI for advertisers and eCPM for audio publishers.